One of the nation’s top homebuilders has been forced to drastically cut its construction prices in Florida because of the state’s slowing housing market.
Rob McGibney, COO of KB Home, ranked 545th on the Fortune 1000 list, revealed to investors in late March that the company had to reduce prices by more than $30,000 in the Sunshine State to drum up local business.
During the homebuilder’s latest earnings call on March 24, McGibney singled out Florida as being KB Home’s worst-performing market during the first three months of the new year.
“In broad terms, Florida was our softest state in terms of sales demand in the first quarter,” McGibney said. “Because of that, we took the most pricing action there to find the market.”
Most “affordability adjustments,” better known in layman’s terms as price reductions, that KB Home had to offer in the first quarter of 2025 ranged between $5,000 and $30,000 per home, but the company had to “do more in Florida to find that market.”
Overall, KB Home expects its average selling price for the full fiscal year 2025 to range between $480,000 and $495,000, down from $500,700 in the first quarter.
Jeffrey Mezger, CEO of KB Home, wrote in the company’s earnings report that demand at the start of the year was more “muted” than usual.
In mid-February, KB Home took steps to address the weak demand by offering “the most compelling value, and buyers responded favorably to these adjustments,” Mezger wrote.
What’s the matter with Jacksonville?
On the earnings call, McGibney highlighted Jacksonville as a particularly weak link in Florida, given that the city has more than seven months’ worth of unsold homes piled up on the market, prompting KB Home to slash prices even more.
The Realtor.com® March 2025 Monthly Housing Trends Report echoes what the homebuilder has been seeing on the ground in Jacksonville, which experienced a drop of more than 15% in pending sales last month compared with the previous year.
Additionally, the city saw homes sit unsold on the market 10 days longer than during the same time in 2024, the third-biggest surge across the nation’s 50 largest metros.
Due to slowing buyer demand, Jacksonville also saw its share of for-sale homes with price reductions soar to just under 28% in March.
The median list price in the Florida metro last month was $399,000, down nearly 4% year over year.
(Realtor.com)
The report attributed the market wobbling in many major metros, including Jacksonville, Miami, and Memphis, TN, in part to consumers’ growing concerns about still-high mortgage rates and the state of their personal finances.
On top of that, escalating uncertainty over President Donald Trump’s economic policies could be giving would-be homebuyers pause, according to Realtor.com economists.
The good news, said McGibney, is that KB Home has been seeing inventory in Jacksonville starting to move, likely due to the price cuts, despite the city’s still-elevated inventory levels.
“We thoughtfully and selectively adjusted pricing as needed on a community-by-community basis to stimulate demand and achieve a higher selling pace,” McGibney told investors. “While base price is the main motivator for our customers, we also provided mortgage-related support to our buyers as needed.”
Orlando and Tampa markets stumble
The KB Home COO noted that Orlando and Tampa markets also softened during Q1 2025.
Realtor.com data from March indicates that Tampa had the second-highest share of homes with price reductions, at just under 29%, among the large metros.
Meanwhile, pending home sales in the city declined nearly 12% from a year ago, and the median list price was down more than 4.5%.
In Orlando, the number of active listings surged more than 45% from the year before, and homes spent 60 days on the market in March, six days longer than during the same period in 2024.
Nearly a quarter of all the for-sale properties in Orlando offered a price cut, up 4.5 percentage points year over year.
(Realtor.com)
Florida’s migration boom stalls
The number of people moving to Florida has shrunk dramatically from the COVID-19-era highs, triggering a housing market slowdown.
The Sunshine State’s high home insurance costs, driven upward by natural disaster risks, are the likely culprits behind the market softening.
Last month, home shopping traffic from Realtor.com showed that just 38.5% of viewers of Florida home listings were from other states, compared with 45.1% in February 2024 and 50.4% in February 2023.
A recent report from Cotality (previously known as CoreLogic) found that Georgia, North Carolina, South Carolina, Tennessee, and Texas are receiving 48% of mortgage applications for those moving out of Florida.
“Florida’s rapid price appreciation combined with soaring home insurance prices and the threat of hurricanes has led people to start looking at other nearby states,” says Cotality chief economist Selma Hepp.
Florida may have fallen victim to its own success, after an influx of new residents during the pandemic pushed its housing market to the brink, with the gap between high demand and insufficient supply causing home prices to skyrocket.
Now that the migration to Florida has cooled off, so has the state’s housing market, leading to expanding inventory of homes and declining prices.
